Tax Rules for Donated Art

by Van Thompson

Collecting art can be an expensive hobby, and many museums and educational institutions would love to have the fruits of a collector's labor. If you're considering donating art, you may be eligible for a tax deduction but will need to keep careful records of your donation and ensure the organization you donate to is a qualified nonprofit.

Tax Deduction

The Internal Revenue Service allows taxpayers to deduct donations they make to eligible nonprofit organizations such as schools, museums or charities. When you donate art, you can deduct the value of the piece from your taxable income, perhaps significantly reducing your tax liability.

Nonprofit Status

While any organization can solicit donations and you can give them your art, your donation is tax-deductible only if the IRS has granted the organization nonprofit status. Ask the organization about its nonprofit status if the tax deduction is important to you, and search the IRS website (see Resources) to ensure the organization is an eligible nonprofit.

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Art Value

If the art is worth less than $5,000, you can simply get a receipt from the organization estimating its value. Art worth more than $5,000, however, requires an appraisal to verify its value and ensure you're not taking an unfair tax deduction. If the art is worth more than $20,000, you are required to attach the appraisal to your tax return and to retain a photo of the item if the IRS requests verification. If the art is worth more than $50,000, the IRS requires you to get a statement of value form. To do this, send a copy of the appraisal and a copy of Form 8283 to the IRS before filing your taxes.

Deducting the Donation

You must itemize your art donations on your tax return, and can usually only deduct up to 30 percent of your adjusted gross income for gifts of tangible objects. Any remaining donation can be carried over in subsequent tax years until you've deducted the full amount. You don't have to attach your receipt or appraisal to your tax return unless the art is worth more than $20,000, but you should retain the appraisal and receipt from the charity to prove the donation in case you are audited.

Capital Gains Donations

If the donor has held the work of art longer than one year before donating it and it has appreciated in value, the donor can deduct the fair market value unless the nonprofit turns around and sells the work of art rather than displaying it, for example. In the case of capital gains property, the donor is limited to deductions of no more than 20 percent of his adjusted gross income.

Exception

One exception to the IRS rules on donating art is that artists who donate their own work -- for either sale, silent auction or exhibition -- are allowed to deduct only the cost of materials used to create that particular piece of work. The artist can't deduct the fair market value of the work.

About the Author

Van Thompson is an attorney and writer. A former martial arts instructor, he holds bachelor's degrees in music and computer science from Westchester University, and a juris doctor from Georgia State University. He is the recipient of numerous writing awards, including a 2009 CALI Legal Writing Award.

Photo Credits

Comstock/Comstock/Getty Images

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